April 16, 2014

Department of Cronyism

Veronique de Rugy

George Gibbs Chair in Political Economy
Summary

What's the point of the Department of Commerce? If not for the Census and the Patent Office, the department would function as little more than a one-stop shop for special interests. Don't believe me? Look at its record.

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This article appears in the May 2014 edition of Reason

What's the point of the Department of Commerce? If not for the Census and the Patent Office, the department would function as little more than a one-stop shop for special interests. Don't believe me? Look at its record.

In Fiscal Year 2013, the Department of Commerce spent about $10 billion and employed 42,829 bureaucrats. A breakdown of the budget by function shows that some 30 percent goes to paying salaries, while 40 percent subsidizes private businesses and local development projects.

Commerce is best thought of as a clearinghouse for an assortment of business subsidies and economic data collection programs. Former Commerce Secretary Robert Mosbacher is unusually candid about the purpose of his old department. In a 1995 Washington Times article titled "Trade Will Go On, Even without Commerce," the onetime administrator called the agency "nothing more than a hall closet where you throw in everything that you don't know what to do with."

The man has a point. Created in the early 20th century, Commerce's largest initial activity was managing the nation's lighthouses. Out of its humble original mandates grew a massive hodgepodge that includes the National Weather Service, the National Marine Fisheries Service, the Bureau of Economic Analysis, the Minority Business Development Agency, the International Trade Administration, the Office of Travel and Tourism Industries, the Manufacturing Extension Partnership, and the Economic Development Administration (EDA).

Elsewhere in this issue, Sonny Bunch discusses the way this sprawling department grew and makes the case for killing it off. (See "Stifling Commerce.") The U.S. has enough debt problems without funding Commerce-style corporate welfare. American businesses managed to prosper and grow long before the department was created. In fact, Commerce's cronyist subsidies are a net drag on the economy because they undermine competition and drain productive resources.

Consider the EDA. Created in 1961 as the Area Redevelopment Administration, this program opened the gates of federal intervention into local affairs. Using the misguided justification that public money was needed to revitalize broken communities, EDA programs rapidly expanded to include more areas and looser eligibility standards. By 2013, the EDA was spending roughly $260 million annually on grants and loans to state and local governments, nonprofit groups, and businesses in "economically distressed regions." Somehow, well-connected corporations and interest groups keep falling into "economic distress."

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